Investment and Uncertainty With Time to Build: Evidence from U.S. Copper Mining

Vadim Marmer () and Margaret Slade ()

Microeconomics.ca working papers from Vancouver School of Economics

Abstract: The standard real-options model predicts that increased uncertainty discourages investment. When projects are large and take time to build, however, this prediction can be reversed. We investigate the investment/uncertainty relationship empirically using historical data on opening dates of new U.S. copper mines - large, irreversible projects with substantial construction lags. Both the timing of the decision to go forward and the price thresholds that trigger that decision are assessed. We find that, in this market, greater uncertainty encourages investment and lowers the price thresholds for many mines.

Keywords: Investment; Uncertainty; Real options; Copper mining; Exhaustible resources (search for similar items in EconPapers)
JEL-codes: G11 L72 Q39 (search for similar items in EconPapers)
Pages: 69 pages
Date: 2016-12-22, Revised 2016-12-22
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Investment and uncertainty with time to build: Evidence from entry into U.S. copper mining (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ubc:pmicro:vadim_marmer-2016-14

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